The Megabus Effect: A Great Success Story of Low-Cost, Convenient, Market-Based Bus Travel Without Government Subsidies or Tax Breaks

From Bloomberg/BusinessWeek, a great story about the success of a new industry that has brought low-cost, dependable, convenient, market-based, Wi-Fi-enabled bus service to millions of Americans, despite rising gas and oil prices, and without any government subsidies, tax breaks or taxpayer funding:

"After decades of decline, the bus is the U.S.'s fastest-growing way to travel, led by curbside service from Megabus, BoltBus, and others.

For bus travel as a whole, the number of daily departures increased by 6 percent in 2010, twice the growth experienced by air travel and 12 times that of Amtrak. The number of curbside passengers rose by at least 33 percent, with Megabus ridership expanding 48 percent. (Amtrak ridership grew by just 6 percent, and the airlines by 5 percent.) The company says growth, including the 20 routes it added last year, is an astounding 65 percent. Curbside buses now account for more than a fifth of all daily bus departures in the country. The American Bus Assn. maintains that traditional intercity bus service on Greyhound, Trailways, and others has even experienced a positive spillover—the group calls it "the Megabus effect."

Much of the recent success of the curbside business derives from its nimbleness. In February the Obama Administration unveiled some specifics of its long-term plan for high-speed rail, requesting $53 billion over the next six years to build and upgrade intercity service—a proposal that has already met opposition. By contrast, the bus simply uses existing roads, requiring no policy debates, government funding, or land management studies. It needs only a curb and a sign.

Bus companies are also able to gauge demand quickly, gather rider input online, then alter pickup locations or routes just by posting changes to their websites. While we're having coffee, Megabus CEO Dale Moser explains that since he's seen numerous requests on transit blogs for new service from Chicago to Memphis, he figures he might as well give the route a try. A couple of weeks later he has the buses up and running.

The curbside bus can also easily add and subtract departures. During Thanksgiving and Christmas in 2010, Megabus continued to sell as many tickets as were requested on its website, adding buses as needed. In Chicago, the buses were lined up all the way around the corner at the pickup location. "It's astounding how few constraints there are to its development and expansion," says Joseph Schwieterman, the director of DePaul's Chaddick Institute. "That's why it's an exciting product to watch. Adding two big hubs in six months—we just don't see that anymore in transportation."

The comparison with rail is revealing. Consider that even after the Obama Administration budgeted $10.4 billion in federal stimulus money to jump-start high-speed rail projects around the country, the states had to submit proposals, federal transportation officials had to select the most viable ones, and state and federal governments had to negotiate these plans with the freight companies that own most of the nation's track. After all that, politicians, citing budget shortfalls, ended up scuttling many of the plans."

MP: Perhaps this is another deflationary factor that is helping to offset rising oil and gas prices, and serves to moderate inflationary pressures. And it's a great example of a competitive, flexible, low-cost, consumer-driven, market-based solution to transportation, in contrast to government transportation options like Amtrak that are the opposite: non-competitive, inflexible, high-cost, politician-driven, and not market-based.  

HT: Paul Cerni